Heres How Venture Capital Is Helping To Lift The Next Generation Of Latinos In Finance

Friday as investors digested the need for more rate hikes to curb inflation.

Although Latinos are the second largest ethnic group in the United States, they are underrepresented in many sectors, including finance, which can seriously affect their ability to build wealth.

A Latino-led and targeted group of venture capitalists is trying to change that.

According to the 2020 census, there are more than 62 million people of Hispanic or Latino descent in the United States. This represents almost 19% of the total population, second only to non-Hispanic whites. They’re also one of the largest and fastest-growing sectors: the group’s gross economic output was $2.7 trillion in 2019, up from $1.7 trillion in 2010, according to a report by the Latino Donor Collaborative.

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But in 2021, Latinos made up just 4% of top executives at large U.S. companies, according to the Hispanic Association for Corporate Responsibility survey. A separate 2019 study by the CFA Institute found that only 8 percent of investment management firm employees were Hispanic, 9 percent Asian, 5 percent Black and 84 percent White.

Investment gap
Latinos also have little access to investment. Hispanic families are less wealthy than their white counterparts, and only 26% of Hispanic families have access to an employer-sponsored 401(k) plan, compared to 37% of black families and half of black families. Economic Policy Institute.

Lack of access to capital markets makes it difficult for Latinos to build meaningful wealth. It also means that they are underrepresented as corporate shareholders if they do not own shares and have a proper say in investment decisions.

“We need to be aware of the relationship between financial and capital markets and the economy as a whole,” said Rodrigo Garcia, global CFO of Talipot Holdings, an investment management group. “In wealth management, it has always been important to be represented among the people who make decisions about buying stocks, bonds, venture capital and more.”

Latino-focused venture capital
There are several venture capital firms focused on Latin America that are working on at least one piece of the puzzle: investing in their communities.

One such company is the Boston Impact Initiative, which has created a $20 million fund aimed at investing in black entrepreneurs.

“We’re taking risks as early as possible, we’re funding very small startups that we hope will one day go public and be available in retail finance,” said Boston Impact CEO Betty Francisco. Initiative. These companies include Synergy Contracting, a woman-owned construction company, and Roundhead Brewing, Massachusetts’ first Latino-owned craft brewery.

Another group, Mendoza Ventures, was created in 2016 to fill the shortage of women and write checks for Latin Americans to fund new ventures. The Boston-based company, led by Adrian Mendoza, has raised $10 million in two funds.

“We provide access to venture capital to accredited young investors, people of color and women,” Mendoza said. Accredited investors are individuals or entities that meet certain income, net worth, or net worth thresholds to invest in complex or complex securities.

“Most of the wealth in America comes from [mergers and acquisitions], and it comes from venture capital and private equity, so why can’t we diversify the other way?” Mendoza added.

What investors can do
There is certainly progress in the financial sector. The number of certified Latino financial planners in 2021 increased by 15% over the previous year. However, only 2.7% of the total class of professionals who passed the exam that year identified as Latino.

Industry players are benefiting from having more people from diverse backgrounds in finance.

“You can’t replicate anyone else’s lived experience,” said Marcela Pinilla, director of sustainable investments at Zevin Asset Management. She added that as a Latina in finance, she wants to attract more people of color to the industry.

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From the perspective of individual investors, one of the most important things they can do is look at what they’re investing in and ask how many of those dollars are going to Latino fund managers, Latino-managed funds, or even Hispanic companies. Command.

“I think about the simple question: ‘Who controls my money?’ “It’s important,” Mendoza said.